The Covid-19 pandemic is causing banks to sacrifice profits to support customers, but some banks still set high profit targets in the hope that the lending situation will improve.
With a profit growth target of 36 percent in 2020 (reaching 4.4 trillion dong), Orient Commercial Joint Stock Bank (OCB) is one of the few banks pursuing high profit plan this year.
In order to gain high profit, many other business indicators of OCB must be at high levels. Specifically, the total mobilisation in market 1 is expected at 103.284 trillion dong, total outstanding credit in market 1 is expected at 90.549 trillion dong, respectively up by 21 percent and 25 percent compared to the realised figures in 2019. Moreover, the total assets are targeted at 150 trillion dong, up by 27 percent and charter capital is expected at 11.275 trillion dong, up by 43%. OCB aims to control bad debt ratio below two percent.
At this profit level, OCB plans to pay the 2020 dividends at25-27%. In 2019, OCB paid dividends in shares at 25%.
When is plan was launched, in addition to the joy, many shareholders expressed their concerns, especially in the context of the epidemic which has made customers’ capital demand can hardly rise, affecting the bank’s lending activities. In fact, the credit growth of the entire banking industry by the end of June 2020 was low at 3.26%.
Explaining the reason for setting high business targets, OCB’s leader said that since year 2020 is the last year implementing the restructuring strategy for the 2016 2020 period, OCB targets more ambitious objectives (in the context when the management approves the bank’s expected credit growth proposal), with Cost Income Ratio (CIR) controlled below 37%.
On the other hand, as of June 30th 2020, OCB has completed 43 percent of the profit plan in 2020, equivalent to 1.870 trillion dong of pre-tax profit. This is the basis for the bank to complete the profit target set in the remaining months of the year.
“In the latest five years, OCB’s profit has increased at an average of 86 percent per annum. In 2020, under the impact of the Covid-19 pandemic, maintaining this growth level is a big challenge. Thus, the bank sets profit target at 36 percent to ensure feasibility,” said Tung.
At the 2020 annual general meeting (AGM) held in late June 2020, Chair of the Board of directors (BOD) of Vietnam International Commercial Joint Stock Bank (VIB) Dang Khac Vy targets a minimum profit of 4.5 trillion dong, up by 10 percent compared to the realised figure in 2019. The bank expects to expand total assets by 20 percent to 222 trillion dong. Credit growth is expected at 164.408 trillion dong, up by 24 percent with the maximum credit growth rate not exceeding the SBV’s allowed level. The bad debt ratio is expected to be less than three percent.
VIB also targets a Return on Assets (ROA) of 1.8%, Return on Equity (ROE) of 25%, and Lend to Deposit Ratio (LDR) of below 85%.
Answering questions of shareholders about the basis to achieve this year’s profit target, VIB’s leader said that in the first half of 2020, VIB estimated to complete about 52 percent of the year plan, so it is confident to achieve the set target with the belief that Vietnam will gradually recover the economy after the Covid-19 epidemic.
“In the last three years, VIB have not had new large bad debts, and the risk appetite has been changed in a flexible way. VIB has also not recorded businesses with large bad debts, and 97 percent percent of its borrowers have secured assets,” Vy added.
For Asia Commercial Joint Stock Bank (ACB), in 2020, the bank plans to achieve a pre-tax profit of 7.636 trillion dong; develops total assets by 12%, customer deposits by 12%, credit by 11.75 percent (the SBV assigned ACB a credit growth limit of 11.75%); controls bad debt ratio below two percent by the end of 2020; and distributes dividends in shares at a ratio of 18%.
Do Minh Toan, general director of ACB said that as of May 31st 2020, ACB achieved 3.5 trillion dong of profit, and by the end of June 2020, ACB was able to complete at least 50 percent of the profit plan for the whole year.
With the current progress, ACB’s leader said that the bank is likely to fulfil its profit plan this year.
Talking more about ACB’s operation, Toan said that due to the Covid-19 epidemic, the credit growth this year is slower than the previous year. ACB’s total operating income declined by more than 30 percentage points.
At the same time, to retain customers, ACB sacrifice the income from lending to support customers, restructure the debts for customers hit by the pandemic until June 30th and then September 30th. The total outstanding credit for restructuring is about 15 trillion dong. According to Toan, these are the slow receivables and will be collected in the fourth quarter of 2020 or the first quarter of 2021.
“In the context of complicated epidemic, ACB’s Executive Board has made plans so that the bank can still be under control in the worst case. ACB’s target this year is to control bad debts at one to two percent, and hopefully less than one percent by the end of 2020,” said Toan.
